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Fraud in corporate environment- results of the survey
31 May 2005
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Fraud level and perception
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Experiencing fraud in company
The vast majority of the surveyed chairmen (64%) encountered fraud in the last three years.
Have you experienced fraud in the course of your business activity in the last three years?
59%
64%
41%
36%
2003
2004
Yes No
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Recorded losses
17 % of respondents could not determine losses due to fraud (2003 - 16%);3 % of respondents lost over PLN 5,000,000, which constitutes a significant decrease compared to the last year and may be the result of a wider spectrum of the surveyed population.
Responses of the surveyed who encountered fraud in the course
of their business activity over the last three years
What was the total amount of losses (in PLN) resulting from fraud identified over the last three years?
20% 20%
10% 10%12% 11%
17%
28%26%
9%11%
7%
3%
16%
less than 50 000 50 001- 250 000 250 001-500 000 500 001-1 000 000 1 000 001 - 5 000 000 more than 5 000 000 Do not know
2003
2004
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Fraud level
13 % of respondents did not know the scale of fraud.
How many cases of fraud have occurred in your company in the last three years?
12%
13%78%
75%
7%
4%
1%
3% 6%
1%
2003
2004
1-10 11-20 21-50 more than 50 do not know
Responses of the surveyed who encountered fraud in the course
of their business activity over the last three years
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Impact and consequences
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Fraud consequences
Most often quoted consequences include:•lower employee morale;•weakened company reputation.
Do your believe that fraud in your company has led to:
57
30
26
10
51
51
23
15
7
14
lower employee morale
weakened companyreputation
loss of businesspartners
loss of shareholders'trust*
other consequences
2003
2004
Responses of the surveyed who encountered fraud in the course
of their business activity over the last three years
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Does fraud in Poland decrease inflow of foreign investments?
68% of the surveyed chairmen believe that there is a strong correlation between the inflow of foreign capital and fraud level.
Does fraud in Poland decrease inflow of foreign investments?
28%
24%
50%
44% 21%
13%
1%
3% 8%
8%2003
2004
definitely yes rather yes rather no definitely no hard to say
Fraud detection
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Fraud detection level
Fraud in corporate environment is not commonly detected.
Only every third respondent who has encountered fraud in his own company believes that fraud detection exceeds 75%.
Over 26 % of companies do not know the percentage of detected fraud cases.
Responses of the surveyed who encountered fraud in the course
of their business activity over the last three years
Please assess the percentage of fraud cases that you managed to detect in your company in the last three years?
31%
31%
20%
26%5%
4%
15%
20%
10%
13% 12%
13%
2003
2004
No cases was detected Below 25% 26% - 50% 51%-75% Over 75% Do not know
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
What is fraud detected?
Most popular fraud detection methods include:• routine supervisory activities of the company’s management;
• whistle blowing;
• internal audit.
How has fraud been detected in your company?
66%
43%
42%
21%
8%
13%
6%
7%
70%
42%
31%
20%
17%
7%
6%
4%
3%
routine supervisory activities ofmanagement
information from employee
internal auditor
coincidence
whistle blowing
law enforcement bodies
risk management system
external auditor
other ways
2003
2004
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Who is responsible for fraud?
In most cases, fraud is committed by employees.
Who was responsible for fraud in your company?
61%
35%
14%
21%
30%
3%
7%
2%
67%
23%
21%
20%
18%
15%
7%
6%
2%
Employee
Junior manager
Supplier
Senior manager
Customer
Agent/representativenot being employee
Public service officer
Competitor
Other persons
20032004
Responses of the surveyed who encountered fraud in the course
of their business activity over the last three years
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Departments most exposed to fraud
Sales and procurement departments are most exposed to fraud.
Responses of the surveyed who encountered fraud in the course
of their business activity over the last three years
In what areas/ departments of your company has fraud been observed?
54%
41%
12%
18%
14%
5%
7%
14%
49%
42%
22%
13%
13%
5%
3%
3%
10%
Sales
Procurement
Production
Marketing
Finance
HR
I T
Payroll
Other
2003
2004
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Reporting and loss recovery
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Fraud reporting
49% of respondents disclose losses due to fraud in their annual financial statements (in 2003 – 57%).
Has your company disclosed losses due to fraud in the financial statements for the last three years?
49%
57%
51%
43%2003
2004
Yes No
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Loss recovery
Loss recovery is not common.• every fourth respondent declared not to have recovered any losses due to fraud;• every third respondent believes that less than 25% of losses have been recovered;• only 15% of respondents declared to have recovered more than 50% of the incurred losses.
Responses of the surveyed who encountered fraud in the course
of their business activity over the last three years
What percentage of losses resullting from fraud has your company recovered over the past three years?
11%
10%
14%
16%25%
26%
34%
38%
10%
7% 4%
5%
2003
2004
No losses were recovered Below 25% 26% - 50% 51%-75% Over 75% Do not know
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Regulations
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Are Polish regulations sufficient to truly prevent fraud?
Polish regulations are not sufficient to truly prevent fraud.
Are Polish regulations sufficient to truly prevent fraud?
3%
5%
19%
18% 35%
36% 40%
39% 3%
2%2003
2004
definitely yes rather yes rather no definitely no hard to say
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Is Polish justice system effective enough in fighting fraud?
The prevailing opinion is that Polish law enforcement bodies (police and Public Prosecutor’s office) do not have sufficient means to fight fraud.
I s Polish justice system effective enough in fighting fraud?
1%
1%
2%
2% 24%
26% 68%
72% 1%
3%
2003
2004
definitely yes rather yes rather no definitely no hard to say
Accession to EU vs. level of fraud in Polish companies
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Consequences of Poland’s accession to the European Union
The situation has not changed after Poland’s accession to the European Union (75%).
Any potential changes would be positive.
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Consequences of Poland’s accession to the European Union (cont’d)
Threats:
•computer crime,
•money laundering,
•organized crime.
Fraud prevention
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
How can we help (1) ?
Identification of risk areas
Understanding and estimating risk scale
Creating risk managementstrategy
Implementing strategy andassigning responsibilities
Introducing and monitoringcontrols
Forming risk management groupand setting goals
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
3. Investigation
2. Detection
1. P
reve
ntion
How can we help (2) ?
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Why Deloitte?
Our Forensic Services Team– scope of activities:
• Fraud investigation services.
• Tracking lost assets.
• Litigation assistance.
• Potential fraud reviews (including DTective – a Deloitte methodology).
• Assistance in development and implementation of fraud prevention policies and
procedures.
• Verification of procedure and policy compliance within money laundering
prevention.
• Business investigative services.
• Recovery of lost computer data.
Fraud – report presentation© 2005 Deloitte & Touche Sp. z o.o.
Contact
Maria Rzepnikowska
Partner
E-mail: [email protected]
Tel: 22 511 08 03
Fax: 22 511 08 13
www.deloitte.com/pl
Deloitte
ul. Fredry 6
00-097 Warszawa
Deloitte & Touche Sp. z o.o.Member ofDeloitte Touche Tohmatsu